Compromise is Latest Iteration of Internet Tax Plan

The National Governors Association (NGA) yesterday called upon Congress to pass the Internet tax moratorium with an amendment that represents a "reasonable compromise" between the industry and state and local governments.

The compromise amendment, which has been offered by Senators Lamar Alexander (R-TN), George Voinovich (R-OH), Bob Graham (R-FL) and Tom Carper (D-DE), would extend the existing moratorium for two years and narrowly expand the definition of tax-free Internet access to include telecommunications services that connect a consumer to an Internet access provider.

"The governors continue to support efforts to extend the Internet Tax Freedom Act (ITFA) in a way that will benefit consumers, aid industry, and preserve the sovereignty of state and local governments. We firmly believe the Internet is a vibrant component of our future economy and should be supported by sound local, state, and federal policy," said Arkansas Governor Mike Huckabee.

Efforts to make the Internet tax moratorium permanent hit an impasse when backers moved beyond the current definition of access, and tried to fundamentally alter the scope of the moratorium so that it would preempt existing state and local telecommunications taxes. According to the Multi-State Tax Commission, preempting these services from existing taxes will cost state and local governments $4-9 billion.

According to NGA, governors have supported a simple extension of the existing moratorium. Proposals that would have resulted in a more narrowly defined bill that addressed industry concerns without placing an unfunded mandate on state and local governments have thus far been rejected by the sponsors of the House and Senate bills -- H.R. 49 and S. 150.

"The amendment introduced by Alexander and Carper is a true compromise and should be supported by the members of Congress who, like the governors, wish to support the growth of the Internet marketplace," said Pennsylvania Governor Ed Rendell. "The amendment would create parity between Internet access technologies without unduly burdening state and local governments."